Malpractice Insurance Premiums Nudge Down Again

For the seventh straight year, malpractice insurance premiums have decreased for three bellwether specialties, and even for sticker-shocked obstetrician-gynecologists on Long Island in New York, according to an annual premium survey released this week by Medical Liability Monitor (MLM).

Rates quoted by a malpractice carrier called Physicians’ Reciprocal Insurers for obstetrician/gynecologists in the New York counties of Nassau and Suffolk, east of Queens, went from $227,899 in 2013 to $214,999 in 2014, a decrease of almost 6%. However, this rate continues to be the highest quoted by any carrier in any state for this specialty.

Overall, malpractice premiums decreased on average by 1.5% in 2014 for obstetrician/gynecologists, internists, and general surgeons, which is slightly less than the 1.9% decrease in 2013. By specialty, rates fell 1.6% for internists, 1.3% for general surgeons, and 1.7% for obstetrician/gynecologists.

Since 2008, overall rates for the three specialties have fallen by 13%, MLM said. To many physicians, this slow decline represents little comfort because it was preceded by an era of rate spikes: Premiums increased more than 20% in both 2003 and 2004, and about 9% in 2005 (rate increases in 2006 and 2007 were less than 1%).

“We haven’t come down as far as where we once were,” said Chad Karls, a principal and consulting actuary for Milliman, who edited the MLM report.

One reason for declining premiums, Karls told Medscape Medical News, is the continued fall-off in malpractice claims per physician, regardless of outcome. “The frequency is about half of what it was in the early 2000s,” he said. Likewise, what Karls calls “indemnity severity” — the amount in court-ordered awards and settlements paid to claimants — has remained flat.

Karls attributes the calmer litigation environment to several probable causes. State-level tort reform such as caps on noneconomic damages has had the intended effect of discouraging malpractice suits. In addition, patient-safety initiatives have reduced the number of adverse events that cause people to sue in the first place.

Hospital employment of physicians also has indirectly depressed premium rates, according to Karls. Many hospitals and health systems self-insure for medical liability, so any physicians they hire are lost to traditional malpractice insurance carriers. To compete for a shrinking market of potential insurees, these carriers keep low-balling rates. They can afford to do so, said Karls, by dipping into cash reserves accumulated to pay future claims. With claims frequency on the downswing, they are betting they can get by with smaller reserves. Karls said carriers have enough of a surplus to afford several more years of premium cuts.

Two Thirds of Rates Did Not Change

In its annual survey of malpractice insurance premiums, MLM asked insurers to quote their standard rates as of July 1 for policies with limits of $1 million for an individual claim and $3 million in any given year for all claims. These rates do not reflect credits, debits, and other factors that raise or lower the dollar amount for an individual physician.

The publication collected hundreds of quotes that represent 65% to 75% of the medical liability insurance market. Some quotes were for entire states, whereas others were for single counties or metropolitan areas.

Of the quoted rates in the survey, 65% did not change from 2013. For the remainder, rate decreases outnumbered rate increases and, in general, were steeper.

The survey includes rate information for seven states with patient compensation funds that reduce the cost of medical liability insurance. In these states, physicians buy a basic policy on their own from a private insurer and pay a surcharge into a fund that boosts their coverage — in some states to the $1 million/$3 million level. The rates reported by MLM in these states are the sum of physician premiums and surcharges.

Internists in Eight States Can Get Coverage for Less Than $5000

Malpractice insurance carriers base premium rates in a given region on their claims history there: Are patients more prone to sue, or less? How likely are juries to find physicians liable for damages? And when there are damages, or settlements, how big are they?

The premium rates published by MLM reveal a nation of extremes when it comes to the malpractice litigation scene. Consider $1 million/$3 million policies for obstetrician/gynecologists, for example. Standard rates for Long Island obstetrician/gynecologists may top $210,000, but the rates in central California, which boasts the lowest standard rate in the country, are just a fraction of that amount, according to MLM. A medical liability carrier there operated by the Cooperative of American Physicians quotes $16,240 for obstetrician/gynecologists for a swathe of 17 counties, including San Francisco. These New York and California locales represented the high and low ends for this specialty in 2013 as well.

Other states in which some, but not all, carriers quoted rates of more than $150,000 for obstetrician/gynecologists are Connecticut, Florida, Illinois, Maryland, and Pennsylvania.

Quotes for general surgeons ran the gamut from $190,829 from The Doctors Company for Miami-Dade County in Florida to $10,868 from MMIC Group in Wisconsin.

Minnesota was home to the lowest standard rate for internists, at $3375 from ProAssurance Casualty. Other states where internal medicine coverage of $1 million/$3 million is available for less than $5000 are California, Idaho, Mississippi, North Dakota, South Dakota, Texas, and Wisconsin, according to MLM. Miami-Dade County in Florida took the dubious honor of having the most expensive rate for internists, at $47,707, as quoted by The Doctors Company.